If there's ever a move you want to take back, recommending a fraud-laden hedge fund to your clients is probably on the list. In this CNN article Hennessee Group, a prominent billion dollar investment advisory firm explains how, given all that we know now, they could have recommended Bayou Management to their circle of clients.

Some investors remain unimpressed with Hennessee's explanations and have their lawsits prepped and pending. Here's the lead. Click through to the full article for the complete story, including details on regulatory rumbles regarding the role of thrid party hedge fund marketers as well as advisory firms such as Hennessee.

Firm that pitched Bayou facing questions - After hedge fund blowup, advisory firm says it might have acted differently; others also under fire.

November 7, 2005
By Amanda Cantrell
CNN/Money, staff writer

NEW YORK (CNN/Money) - Hedge fund advisor Hennessee Group recommended Bayou to its clients. Now it's being sued. The firm says it regrets steering clients to Bayou but had reason to think at the time the hedge fund was legitimate.

Bayou's founder and CFO pleaded guilty nearly six weeks ago to charges that they raised more than $450 million from investors, lied about the fund's returns and formed a phony accounting firm to audit the firm's results.

Hennessee Group admits it should have done a better job of spotting red flags at Bayou, including the fact that Bayou wasn't using a well-known auditor. Hennessee recently spoke out about Bayou, acknowledging that the firm didn't catch the fraud, but defended its review process nonetheless.

"I can see why, in hindsight, it might seem like this was all very obvious, but it's important to realize how it appears when you are going through it real time," Leeana Piscopo, senior vice president and chief compliance officer at Hennessee, said in an interview...

Extensive additional details in the full article.

-- MDT

Labels: Bayou Group